Snapchat Cuts 16% of Workforce and Bets on AI for Recovery

Snapchat Reduces Workforce and Focuses on Automation

Snapchat, the popular messaging app, has made the drastic decision to reduce its global workforce by 16%, which equates to about 1,000 employees. This initiative, announced by Evan Spiegel, the founder and CEO of Snap, is part of a strategy aimed at automating repetitive tasks through artificial intelligence. The goal is clear: to achieve rapid profitability to effectively compete with giants like Meta and TikTok, while maintaining the trust of activist investors.

The elimination of these positions at Snap is accompanied by a desire to replace human labor with algorithmic solutions. Indeed, the parent company of Snapchat has decided to freeze 300 planned hires, affecting numerous departments. This approach aims to establish a faster and more efficient working method, where digital tools take over the support and management tasks traditionally handled by employees.

Cost Reduction and Market Pressure

According to Derek Andersen, CFO of Snap, this restructuring aims to reduce annual costs by $500 million. Although the company recorded a revenue of $1.53 billion in the first quarter, it faces growing market skepticism, exacerbated by a 31% drop in its stock since the beginning of the year. Evan Spiegel emphasized that technological advancements now allow for the reduction of repetitive work, thereby justifying this transition to automation.

Increased Dependence on External Providers

The job cuts particularly affect junior employees, who were previously responsible for manual information processing. Unlike companies like Meta or Google, Snapchat relies heavily on external providers for its artificial intelligence solutions. This dependence comes at a cost, particularly in terms of the need for generalist engineers within the company.

Third-party programs now handle data flow management, relegating employees to the role of supervisors of mathematical models provided by Silicon Valley giants. This strategic choice carries risks for Snap's technical sovereignty, as no algorithm purchased on the market can match the creative sensitivity needed to retain young users. Nevertheless, Evan Spiegel insists that these software advancements allow for an increased work pace with smaller teams, thereby sidelining collaborators whose tasks are now automated.

Pressure from Activist Investors

However, the argument for technological innovation and AI advancements is not enough to explain this drastic workforce reduction. The pursuit of profitability is also driven by the demands of the activist fund Irenic Capital Management, which recently called for swift changes to boost Snap's stock price. In a letter to management, this investor criticized the company's excessive hiring compared to its competitors.

• “Like many of your competitors, you have over-hired”
• “Unlike them, you have not corrected course”

By simplifying its hierarchical structure, Snap hopes to achieve significant savings, but the task appears complex. Global regulators threaten to restrict minors' access to the platform, which could undermine advertising revenues. While machines handle daily maintenance and moderation, Evan Spiegel is directing his remaining resources towards the development of augmented reality glasses. The remaining employees, survivors of this third layoff plan in four years, will be responsible for steering these new products.